The NASD requests comment on a proposed amendment to Article VIII, Section 5 of the NASD By-Laws that would expedite the filling of vacancies created by departures of District Business Conduct Committee (DBCC) members during their terms and avoid the necessity of holding interim elections.

The amendment would provide for appointment of a person by the DBCC to fill the departing Committee member's seat until the next regularly scheduled election. At that time, the normal election process would occur to elect a Committee member to serve for the duration of the departing Committee member's term.

The text of the proposed amendment follows this notice.

BACKGROUND AND SUMMARY OF AMENDMENT

The NASD is concerned about practical problems encountered by its District Offices when vacancies on a DBCC occur due to departures of Committee members during their terms. Such problems, including the necessity for holding special interim elections, would be alleviated by the proposed amendment to Article Vin, Section 5 of the NASD By-Laws.

The current procedure under Sections 5(a) and (b) of Article VIII of the NASD By-Laws sets forth a two-step mechanism. If the unexpired term of the Committee member causing the vacancy is less than 12 months, the vacancy is to be filled by appointment, by the remaining members of the DBCC, of a representative of a member firm having a place of business in the same district If the unexpired term of the Committee member causing the vacancy is 12 months or more, the vacancy is to be filled by election conducted in accordance with the provisions of Section 4 of Article VET.

The NASD Board of Governors believes that the current procedure may be burdensome and unnecessary. The Board, upon the recommendation of the Advisory Council and the National Business Conduct Committee, is therefore proposing to implement one procedure for situations involving unexpired terms of any length that result in a vacancy on a DBCC. That procedure would involve the appointment, by the remaining members of the DBCC, of a representative of a member firm doing business in the same district to fill the departing Committee member's seat until the next regularly scheduled election. Pursuant to the normal election process, a Committee member would then be elected to serve for the duration of the departing Committee member's term.

In so proposing, the Board recommends that in each instance, the DBCC should seriously consider former DBCC members for the appointments. Because of prior experience, such persons would readily be able to assume such a position and make a meaningful contributioa

The NASD encourages all members and other interested persons to comment on the proposed amendment Comments should be directed to:

Comments must be received no later than August 1,1988. Comments received by this date will be considered by the NASD National Business Conduct Committee and NASD Board of Governors. Any changes to the NASD By-Laws that are approved by the Board must be voted upon by the membership and thereafter filed with, and approved by, the Securities and Exchange Commission before becoming effective.

Questions concerning this notice can be directed to Deborah F. Mcllroy, Attorney, NASD Office of General Counsel, at (202) 728-8816.

PROPOSED AMENDMENTTO ARTICLE VIII OF THE NASD BY-LAWS

Note: New text is underlined; deleted text is in brackets.

Filling of Vacancies on District Committees Sec 5. All vacancies in any District Committee other than those caused by the expiration of aCommittee Member's term of office shall be filled as follows:

[(a) If the unexpired term of the member causing the vacancy is for less than twelve months, such vacancy shall be filled by appointment by the remaining members of the District Committee of some member of the Corporation having a place of business in the same district

(b) If the unexpired term of the member causing the vacancy is for twelve months or more, such vacancy shall be filled by election, which shall be conducted as nearly as practicable in accordance with the provisions of Section 4 of this Article.]

The District Committee shall appoint a representative of a member firm having a place of business in the same district to fill any vacancy resulting from the unexpired term of a departed Committee Member. Such appointment shall be effective until the next regularly scheduled election occurs, in accordance with the provisions of Section 4 of this Article. Following this election, the newly elected Committee Member will serve only the duration of the departed Committee Member's term.